Xbox bundled with games for holidays

Microsoft is bundling two free games with its Xbox to attract more customers during what may likely be a frosty holiday season.

Between Oct. 15 and the end of the year, Xbox buyers will get copies of "Sega GT 2002," a racing game, and Sega's "Jet Set Radio Future" free with the purchase of a $199 Xbox. Separately, each game costs $49.95.

The bundling deal follows one of the hallowed maxims of consumer PC retailing: Give away something for free, and the customers will come. By including two games, Microsoft and its retailers can tout Xbox as a better value than Sony's PlayStation 2, which so far has been more popular and features more game titles.

"The intent behind this is to reach a wider audience," said John O'Rourke, director of Xbox marketing.

Deals like this could become more prevalent with the specter of a slow holiday sales season. The fourth quarter is typically the strongest period for electronics manufacturers. Threats of war, a weak economy and other factors, however, have sapped the life from the market. PC makers have already launched price wars, selling computers for $399, to nab whatever sales they can.

For game console makers, bundling can represent a risk. Consoles actually sell for less than they cost to make, as manufacturers expect to recover the difference by selling game titles. Giving away game titles, therefore, winnows the game-selling opportunity.

Retailers have given away games with Xbox consoles in their own promotion, but this is the first time Microsoft has engaged in a nationwide, standard bundling deal.
O'Rourke would not discuss the financial terms of the deal and whether Microsoft is paying Sega for the game discs.

Microsoft, Sony and Nintendo all cut their console prices in the summer, stimulating sales. The Xbox went from $299 to $199.

Bundles are typically less financially painful than price cuts, but often can have a similar effect of stimulating sales.

Packaging the games with the console will make it easier for relatives to give Xbox as a gift because they don't have to sort through a myriad of game titles, O'Rourke added.

Along with the two games, the Redmond, Wash.-based software giant has begun to sell its game console with a sleeker, smaller controller originally designed for the Japanese market.

Hardcore gamers started buying the controllers on export sites soon after Xbox's Japanese release. Microsoft began selling it as an add-on in May for $29. Due to its popularity, the Japanese controller will now become standard equipment on the Xbox.